Derive the money multiplier for an economy

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Derive the money multiplier for an economy with the following three types of leakages: (i) a cash-deposit ratio (k) desired by the public, (ii) a legally required reserve-deposit ratio (r) for the banks; and (iii) an excess reserve-deposit ratio (e) desired by the banks. Use the formula to explain how behavioural changes during an asset inflation era could fuel asset inflation. Also use the formula to explain how behavioural changes during a financial crisis could cause further deepening of the crisis.

Reference no: EM133080130

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